August 11, 2017 | Credit-Fueled Speculation Frenzy has Hollowed Out Financial Stability All Over

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Many factors have earned us a much deserved and necessary mean reversion in North American realty prices including: ludicrous pricing/record low affordability, flat wages, aging demographics, low investment yields, unsustainable levels of speculation, necessarily tougher mortgage lending standards and in some of the hottest markets like Vancouver and Greater Toronto Area, the adding of a Non-Resident Speculation Tax.

Strong growth of real estate prices, sales and construction has powered China’s economy this year, putting gross domestic product on the path to its first annual growth acceleration since 2010…But authorities are increasingly concerned that the reliance on property for growth is fuelling financial risk and encouraging speculation rather than investment in the real economy.

“The real estate industry’s excessive prosperity has not only kidnapped local governments but also kidnapped financial institutions — restraining and even harming the development of the real economy, inflating asset bubbles and accumulating debt risk,” Yin Zhongqing, deputy director of the finance and economics committee of the National People’s Congress, said in a speech on Thursday. “The biggest problem currently facing the country is how to reduce reliance on real estate,” he added.